Analysts raise share price target for NW medical group and reiterate their ‘Buy’ call

AMS Winsford HQ

Analysts have reiterated their ‘Buy’ call on Winsford-based Advanced Medical Solutions, and raised their share target price from 225p per share to 257p.

Dr Mike Mitchell and Dr Julie Simmonds, with investment bank Panmure Gordon, issued their upgrade in the wake of the group’s annual results, in March, and its announcement of the proposed acquisition of French business Peters Surgical, a global provider of specialty surgical sutures, mechanical haemostasis and internal cyanoacrylate devices, for a total of £120.8m.

In their note, the analysts say: “As Advanced Medical Solutions looks towards 2024 and beyond, the acquisition of Peters Surgical represents, in our view, an important point in the company’s evolution as a global player in its chosen markets.

“Not only does the wider platform add strength in terms of geography – adding manufacture and distributed sales in APAC and EMEA for example – but the expansion of the product offering combined with direct sales in areas where AMS has traditionally been weak also means there is potential for future realisation of sales and cost synergies.

“We reiterate our Buy recommendation, underpinned by a new target price of 257p (previously 225p) based on updated forecasts and peer-group multiples.”

They add: “It’s fair to say that the last 10-12 months have been something of a rollercoaster for AMS: having defined a pathway for the new US LiquiBand route-to-market strategy in the early part of 2023, the extended execution timeline, the extent of channel de-stocking and the updated royalty guidance from Organogenesis left the business with a major hill to climb.

“With those issues now broadly dealt with, full year numbers in March reassured on revised expectations and came in parallel with the most significant deal for AMS for some time.”

They said the proposed circa £120m acquisition of Peters Surgical – due to complete on current timelines by the end of June 2024 – represents an important opportunity for the business.

“Indeed, it appears that AMS and Peters have been well known to each other for several years but, if a deal was either too early or too expensive, it seems that the recent timing was ‘just right’.

“On the implied pre-synergies multiples (1.7x FY23 sales, 13.4x reported EBITDA) we don’t consider the terms to have been too rich given the strategic opportunities now afforded by the group.”

They concluded: “We consider the enlarged group is likely to offer a number of strategic opportunities given the complementary aspects of commercial footprint, product range and manufacture, with scope for potential sales and cost synergies that not yet factored into our forecasts.”

The group announced annual results in March which revealed revenues of £126.2m, up from £124.3m, while pre-tax profits of £21.2m were 18% down on the previous year’s £25.9m mark.

Net cash stood at £60.2m, down from £82.3m the previous year, but the full year dividend was recommended at 2.36p per share, an improvement on the prior year’s 2.15p payout.

AMS said it was pleased to report results in line with updated guidance and significant commercial, regulatory and clinical progress as it continues to build its platform for growth and invest in its portfolio of next-generation products.